Carney hints at rates rise on horizon

THE Governor of the Bank of England yesterday gave his strongest indication yet that interest rates could rise for millions of households.

Mark Carney said rates could go up if wages increase and businesses start investing more.

It is a stark contrast to his words just a week ago, when he insisted an increase was not on the cards – suggesting a rise could come far sooner than expected.

The pound rose 0.9 per cent against the dollar in response to his comments, jumping above $1.29 in its biggest upward move since the snap election was announced.

Speaking at a European Central Bank meeting in Portugal, Mr Carney argued that ‘some removal of monetary stimulus is likely to become necessary’ if investment and wages grow.

A rise from the current all-time low of 0.25 per cent would be a boon for savers, who have suffered low rates of return for almost a decade. However, homeowners could see an abrupt increase in mortgage repayments.

David Hollingworth, of mortgage broker London & Country, said: ‘Borrowers will have to be very savvy and take advantage of the rates on offer now, because they’re very competitive. If the markets do start to feel that a rate rise is going to happen ... mortgage rates will rise.’

Mr Carney’s words are the latest blow in a war over rates at the Bank after inflation surged to 2.7 per cent, far above its 2 per cent target.

The City was shocked when the ratesetting Monetary Policy Committee met this month and three of the eight members voted for a rise – the highest number since 2011.